The Municipal Corporation of Greater Mumbai invokes Section 62 of the Insolvency and Bankruptcy Code, 2016, contesting the National Company Law Appellate Tribunal’s rejection of its appeal related to a ...
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1
REPORTABLE
IN THE SUPREME COURT OF INDIA
CIVIL APPELLATE JURISDICTION
CIVIL APPEAL NO. 6350 OF 2019
MUNICIPAL CORPORATION OF GREATER
MUMBAI (MCGM) ...APPELLANT(S)
VERSUS
ABHILASH LAL & ORS. ...RESPONDENT(S)
J U D G M E N T
S. RAVINDRA BHAT, J.
1.The Municipal Corporation of Greater Mumbai (hereafter
“MCGM”) appeals under Section 62 of the Insolvency and
Bankruptcy Code, 2016 (hereafter “IBC” or “the Code”) against the
order of the National Company Law Appellate Tribunal (hereafter
variously “NCLAT” and “the Appellate Tribunal”), rejecting its plea
with respect to a resolution plan approved by the National Company
Law Tribunal (“NCLT”) under the provisions of that Code.
2
2.MCGM owns inter alia, Plot Nos. 155156, 162 and 168 (all
plots hereafter called “the lands”) in village Marol, Andheri (East)
Mumbai. By a contract (dated 20
th
December, 2005) SevenHills
Healthcare (P.) Ltd. (the company facing insolvency proceedings,
hereafter “SevenHills”) agreed to develop these lands (which were to
be leased to it for 30 years) and construct a 1500 bed hospital.
MCGM stipulated several conditions, including that 20% of the beds
had to be reserved for use by the economically deprived, and that
SevenHills had to complete the construction in 60 months
(excluding monsoons). The sixtymonth period ended on 24
th
April,
2013; the project however, was not completed. In terms of Clause
15(g), the lease deed had to be executed within a month after
completion. However, the deed was not executed as the project was
not completed. Further, SevenHills had to pay lease rent at the
annual rate of 10,41,04,000. MGCM alleges that there were
₹
defaults in these payments. In these circumstances, MCGM issued
a show cause notice on 23
rd
January, 2018, proposing termination
of the contract/agreement. It is submitted that SevenHills owed
MCGM an amount of 76,05,07,780.
₹
3
3.On the strength of the contract, SevenHills had borrowed from
banks and financial institutions. It had created security by way of
mortgage of the said lands, citing Clause 5, which enabled the
creation of such encumbrances. SevenHills’ inability to repay its
debts led to the initiation of insolvency proceedings by Axis Bank.
On 13
th
March, 2018, before the period given by MCGM’s show
cause notice ended, the Petition (CP (IB) No. 282/7/HBD/2017) was
admitted by the Hyderabad Bench of the NCLT. The first
respondent was appointed as the Resolution Professional (hereafter
“RP”); this was approved by the Committee of Creditors (“CoC”) as
required by the Code, on 12 April, 2018. A publication for
expression of interest (“EOP”) was issued on 14 May, 2018; later, on
25
th
June, 2018 and 16
th
July, 2018, the terms of the Request for
Proposal (RFP) and criteria for evaluation (of RFPs received) were
approved. As a result of the RFP published, a resolution plan was
submitted by Dr. Shetty’s New Medical Centre (“SNMC”). After
discussion with the CoC, a revised RFP was submitted by the RP.
The revised resolution plan was approved by the CoC on 4th
September, 2018.
4
4.The resolution plan projected infusion of over 1000 crores by
₹
SNMC. That amount was to be borrowed; for this purpose,
SevenHills’ properties movable and immovable, were proposed to
be secured by hypothecation and mortgage respectively. Operational
creditors were to be paid off to the extent of 75%. Further, the plan
proposed payout to the tune of 102.3 crores to MCGM as against
₹
its total claim of 140.88 crores, and also committed to honouring
₹
the terms of the agreement entered into by SevenHills and providing
20% of the beds (of the hospital to be constructed) to the poor and
weaker sections of society. The networth certificate furnished by
SNMC indicated that it possessed sufficient funds.
5.MCGM filed an application (I.A. No. 207/ 2018) claiming that
it ought to be declared as a Financial Creditor and a Member of the
Committee of Creditors. It made several submissions, which
indicated that subject to stipulations with respect to completion of
the hospital project in a timebound manner, and subject to SNMC
providing 20% beds in the completed hospital, for use by the
economically weaker sections (and at the disposal of MCGM) and,
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lastly subject to clearing its (MCGM’s) claims to the tune of 140.88
₹
crores, it was agreeable to the resolution plan. However, later
during the proceedings, it opposed the resolution plan, arguing that
being a public body as well as a planning authority, it had to
comply with the provisions of the Mumbai Municipal Corporation
Act, 1888 (“MMC Act”), which meant that all action and approval
had to be taken by the Improvement Committee of the Corporation.
It was also stated that the show cause notice (“SCN”) dated 23
rd
January, 2018 had been already issued by MCGM proposing to
terminate the contract (with SevenHills) to which there was no
response and that in the absence of a lease, the provisions of
Section 14(1)(d) of the Code could not prevent the MCGM from
terminating the agreement. Another argument made was that the
period of CIRP in the case began on 13
th
March, 2018 when the
petition was admitted and the period of 270 days expired on 8
th
September, 2018; an extension of 90 days provided in Section 12(3)
was granted by the Adjudicating Authority on 4
th
September, 2018
and the extended period came to an end on 7
th
December, 2018;
thus the CIRP has lapsed by efflux of time.
6
6.The NCLT, after considering the views of the RP, MCGM, the
creditors and SNMC, held that:
“29.It may be relevant to note here that the
Application for approval of the resolution plan
was filed on 07.09.2018. The MCGM at a belated
stage has come up with its objections to the
Resolution Plan with the contention that it is
undisputed owner of the plot on which one of the
hospitals of the Corporate Debtor in Mumbai is
built. The various objections raised by MCGM as
enumerated hereinabove at a belated stage are
neither tenable nor acceptable. It is clear from the
record that MCGM is taking a stand which is
totally contrary to its own decisions and factual
submissions. The final prayer of MCGM is to
reject the 'resolution plan' and order for
liquidation of the Corporate Debtor. The RP in his
submissions has clearly pointed out as to why
the averments of MCGM are erroneous and
incorrect. For the sake of briefness, the
submissions made by RP as stated supra are not
discussed in detail once again. This Adjudicating
Authority is of the view that the contentions
raised by MCGM cannot be accepted due to the
conflicting and contradictory stands taken by it in
the course of hearings. Further, the contention of
MCGM relating to expiry of the period of 270 days
is untenable and unacceptable for the reason that
the Application by the Resolution Professional for
7
the approval of the Resolution Plan has been
made well before the expiry of the period of CIRP
and the same is in accordance with the provisions
of the Code. Therefore, the objections raised by
the MCGM are hereby rejected.”
7.The NCLT also held that the plan filed along with the
application met the requirements of Section 30(2) of the Code, and
Regulations 37, 38, 38(IA) and 39(4) of IBBI (CIRP) Regulations,
2016. It also held that the resolution plan did not contravene any of
the provisions of Section 29A and was unanimously approved by
that CoC; it provided for 78.07% of payment to financial creditors
and 75% of payment to operational creditors including doctors,
irrespective of claims in incorrect forms. Further, the resolution
applicant is also addressing the dues payable to MCGM as stated in
the resolution plan. Further, that NCLT observed that on
comparison of the amount offered in the resolution plan with Form
H submitted by the RP, it was seen that the amount proposed in the
plan was more than that of the value of liquidation of the Corporate
Debtor. It accordingly approved the plan.
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8.Aggrieved by NCLT's order, MCGM approached the Appellate
Tribunal, before which several grounds were urged, including that
since the conditions stipulated in the contract (with SevenHills
Healthcare) had not been complied with, there was no lease deed
and consequently no interest inured in the land, in favour of the
Corporate Debtor. It was also urged that the resolution applicant
was aware that the property belonged to MCGM, and had not vested
in the Corporate Debtor. Despite these circumstances, the proposal
and revised proposal incorporating encumbrances of the lands were
made contrary to law. It was also specifically urged that mandatory
provisions of the MMC Act requiring express authorization by the
corporation for transfer or creation of any interest in land had not
been complied with and resultantly, the proposal and revised
proposal approved by the NCLT, so far as they dealt with the
property and lands, were not enforceable against MCGM.
9.The NCLAT in its impugned order, took note of a memo filed
on behalf of the MCGM on 20th April, 2019 (before the NCLT), that
the revised resolution plan had been accepted and all terms
9
specified in its written submissions, were to be incorporated. As a
result, the NCLAT was of the opinion that there was no scope for
interference with the order of the Adjudicating Authority/NCLT.
10.It is argued on behalf of MCGM by its learned senior counsel,
Mr. Neeraj Kaul, that no lease deed was executed in favour of
SevenHills, the Corporate Debtor. MCGM was the undeniable owner
of the land; as there were no assets of the Corporate Debtor, it
stated that a duly registered lease deed would be executed. The
proposal and revised proposal seeking direction with regard to the
lease deed, had to be necessarily dealt with in accordance with law.
This meant that unless MCGM, expressly approved the revised
plan, whereby a lease deed could be executed in favour of the
SevenHills Healthcare Pvt. Ltd. (or in favour of the resolution
applicant SNFC), neither the adjudicating authority nor the NCLAT
could issue any direction seeking to bind MCGM with respect to the
manner it had to deal with properties that belonged to it.
11.It was emphasised that the effect of the impugned order is to
prevent MCGM from violating the law. The direction which was
10
highlighted was in violation of Section 92 of the MMC Act. Learned
senior counsel underlined that the written submissions filed on
behalf of MCGM could not be construed as an admission, or that
MCGM was bound to agree to the revised proposal. It was
alternatively argued that at best, these submissions could be
considered as concessions of law which were never binding on
MCGM.
12.It was argued that there was no question of incorporating any
direction or approving the revised plan, which in any manner
affected MCGM’s properties. In this context, Mr. Neeraj Kaul,
learned Senior Counsel, urged that the terms of the original
contract (dated 20
th
December, 2005) had been violated; the 1500
bed hospital had not been completed by the stipulated date.
Furthermore, arrears of lease rentals had mounted together every
attendant liability. In these circumstances, even before the
insolvency proceedings were initiated, MCGM issued a show cause
notice proposing to terminate the contract. It was further
emphasised that since the terms of the contract were infringed, in
fact, there was no subsisting lease which could have been dealt
11
with by the revised proposal and later by the Adjudicating
Authority. It was submitted that the impugned order has completely
noted these salient aspects.
13.On behalf of the RP (who has been arrayed as the first
respondent) it is argued by Mr. C.A. Sundaram, learned senior
counsel that MCGM had categorically consented to the resolution
plan in writing before the NCLT and the Appellate Tribunal. He
points out that in the written submissions dated 28
th
November,
2018, 29
th
April, 2019 and 14
th
May, 2019 MCGM categorically
stated that the resolution plan be approved and its application
before the NCLT ought to be disposed of in terms of the
commitment given by the resolution applicant/SNMC. It is pointed
out that the Appellate Tribunal, after hearing the submissions of
MCGM that it had no objections to the resolution plan, affirmed it.
MCGM, counsel submitted, has not refuted that such a statement
was made before the NCLAT. It is therefore the undisputed position
that MCGM had no objections to the resolution plan. That being the
case, counsel argues that the appeal is not maintainable.
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14.Mr. Sundaram argued that MCGM’s contentions that no
interest or leasehold rights in the land were created in favour of the
Corporate Debtor, flies in the face of its letters and also its
application to the NCLT, which in para 4, admitted that the lands
were leased to the Corporate Debtor. In fact, MCGM filed the
application claiming that the lease was a capital or finance lease
and the unpaid lease rentals were a financial debt within the
meaning of the Code. Unlike the written submissions, MCGM did
not even explain on what basis it had filed the application to the
NCLT regarding its position that no leasehold rights subsisted.
15.Learned senior counsel submitted that MCGM was invited to
attend and participate in CoC meetings due to its position as owner
of the land on which the Mumbai hospital of the Corporate Debtor
is located. The issue of whether or not the corporate debtor has any
leasehold rights under the contract (of 2005) is a disputed question
of fact which can only be adjudicated upon in civil proceedings after
conducting a civil trial.
13
16.It is also argued alternatively, that assuming for the purpose
of argument that no leasehold rights were created in favour of the
Corporate Debtor, the resolution plan does not create any leasehold
rights in favour of the respondent applicant/SNMC. Learned senior
counsel argued that the resolution plan merely envisages a change
in the shareholding of the Corporate Debtor but does not transfer
any of MCGM’s assets to SNMC. Therefore, it is false to suggest that
the resolution plan transfers MCGM’s assets to SNMC. It was
argued furthermore that though MCGM was not entitled to, nor
treated as a financial creditor, it was nevertheless invited to
participate in CoC meetings, interact as well as negotiate favourable
terms with potential resolution applicants. To further safeguard
MCGM’s interests, the RFP also required all prospective resolution
applicants to submit their plans to resolve the dispute with MCGM.
17.Mr. Sundaram also submitted that SNMC’s revised proposal to
MCGM assured repayment of its entire dues. In light of a proposal
of this nature, MCGM’s stand seeking liquidation of the Corporate
Debtor appears not only arbitrary but also prima facie vindictive.
14
18.It is also submitted that the resolution plan is absolutely
unconditional in nature and in no manner contingent on the
resolution of the dispute with MCGM. It is submitted that such
unconditionality is the most fundamental aspect of the resolution
plan. This unconditional nature is recorded in the minutes of
meetings of the 8th meeting of the CoC held on 20
th
August 2018.
MCGM participated in the meetings of the CoC, including the 8th
CoC meeting, and was provided a copy of the minutes
contemporaneously. These minutes record SNMC’s categorical
statement that the negotiations with MCGM are in progress and
that the resolution plan is unconditional and in no manner
dependent on the outcome of such negotiations. Further, there is
no provision in the resolution plan (and none has been cited by
MCGM) which suggests that the plan is conditional on settlement
with it (i.e. MCGM).
19.It is also submitted that any dispute with MCGM in relation to
the lease of the underlying land has no bearing on the validity of the
resolution plan, under Section 31 of the Code. Having been
15
approved by the CoC and the NCLT on merits, the plan attained
finality and binds MCGM as a stakeholder in the Corporate Debtor.
MCGM therefore, cannot hold the entire CIRP of the Corporate
Debtor to ransom despite not even having raised a single objection
on the validity of any specific term in the resolution plan under
Section 30(2) of the Code.
20.Mr. Ramji Srinivasan, appearing on behalf of the CoC, argued
that the financial creditors were interested in ensuring that their
dues were paid, preferably in full. SNFC’s resolution plan held out
the best assurance toward that end. He also argued that the
question of obtaining any approval under Section 92A either for
creation of charge, or for any other purpose did not arise, because
the terms of the contract, which in fact amounted to a lease (as it
was a registered instrument and MCGM had received over 10
₹
crores as initial lease consideration). Therefore, the resolution plan
approved by the NCLT, and later, NCLAT, were sound and did not
call for interference.
16
21.It was argued, furthermore, that the reliance on Section 92 of
the MMC Act is misguided as it seeks to superimpose provisions of
the MMC Act on the provisions of the Code. This is clearly
impermissible in terms of the nonobstante provision contained in
Section 238 of the Code.
22.Mr. K.V. Vishwanathan, learned senior counsel for SNFC,
argued that the plan approved provided the best solution for the
financial woes of the Corporate Debtor. It was argued that SNFC
never represented that it would mortgage or obtain any loan on the
strength of the lease. Nor did it ever urge that MCGM’s permission
was not necessary. He pointed to the terms of the resolution plan
and submitted that they were subject to MCGM’s obligations to
follow the law.
23.It was submitted that the proposed plan contemplates
compliance with the various conditions of the contract agreement
including without limitation, 20% reservation of beds for MCGM's
employees and settlement of MCGM's claimed dues. The resolution
plan proposed payment to MCGM (which was enhanced to 100% by
17
a later proposal) at clause 2.2.2(b). Further, clause 2.2.3(f) of the
resolution plan again records the proposed payment to MCGM by
stating that while the resolution professional has not admitted the
claims submitted by MCGM, SNMC recognizes such dues payable to
it and shall pay 102 crores in terms of the offer made to MCGM as
₹
recorded.
24.In the present case, Section 92 of the MMC Act has no bearing
on the validity of the resolution plan, the approval order or the
impugned order. Section 92 of the MMC Act mandates and
prescribes the manner in which disposal of land belonging to the
appellant would take place. However, the resolution plan does not
contemplate any disposal of the said land or creation of any
additional rights and obligations of MCGM or the Corporate Debtor
in relation to the lands. It is merely the shareholding of the
Corporate Debtor which undergoes a change pursuant to the
resolution plan. MCGM cannot place any embargo on such
shareholding changes by resorting to proceeding under the Code.
18
25.It was urged that SNMC does not acquire any interest in the
said land and only acquires managerial control over the Corporate
Debtor by way of holding equity shares in the Corporate Debtor.
Therefore, there arises no question of Section 92 of the MMC Act
being violated through the resolution plan.
Discussion regarding the insolvency process and relevant
provisions of the MMC Act
26.On admission of an insolvency application preferred by a
financial creditor/operational creditor, a moratorium is declared on
the continuation and initiation of all legal proceedings against the
debtor. The NCLT appoints an interim resolution professional
(“IRP”). The moratorium operates till the completion of the
insolvency resolution process which, by law should be completed
within a mandated time frame. During the moratorium period, the
debtor cannot transfer, encumber or sell any asset. Upon
appointment of an IRP, the board of directors stands suspended
and management vests with the IRP. These professionals (IRPs)
19
have to conduct the insolvency resolution process, take over the
assets and management of the company, assist creditors in
collecting information and manage the insolvency resolution
process. The term of the IRP continues until an RP is appointed
under Section 22. The IRP has to first determine the debtor’s
financial position through information collection regarding assets,
finances and operations. Information may include data relating to
operations, payments, list of assets and liabilities. The IRP further
has to receive and collate claims submitted by creditors.
27.The RP selected by the NCLT has to constitute a committee of
creditors (CoC) comprising all the financial creditors of the
corporate debtor. This provision is aimed at creditors adopting a
collective approach towards insolvency resolution instead of
proceeding individually. Key decisions of the process, and the plan
to be eventually finalized are to be approved by the CoC upon its
satisfaction that the provisions of the most acceptable plan would
ensure that their dues are cleared.
20
28.The Code is principally aimed at aiding a corporate debtor in
the resolution of its insolvency condition without approaching
liquidation. The key to this process is the finalization of an
insolvency resolution plan. A suitably structured plan would
provide for repayment of the debtor’s outstanding liabilities after
evaluating its financial worth, at the same time ensuring its survival
as a going concern. The resolution plan must necessarily provision
for repayment of the debt of operational creditors in a manner such
that it shall not be lesser than the amounts that would be due,
should the debtor be liquidated per Section 30(2) of the Code. Also,
the plan should identify the manner of repayment of insolvency
resolution costs, the implementation and supervision of the
strategy, and should be in compliance with the law. If the terms
(including the terms of repayment) under the resolution plan are
approved by the committee of creditors, it has to be further
approved by the NCLT, which is the adjudicating authority.
29.In this case, it is not the provisions of the IBC which this court
has to primarily deal with; it is rather whether the process and
21
procedure adopted by the NCLT and later the NCLAT, in overruling
MCGM’s concerns and objections with regard to the treatment of its
property (i.e. the lands) is in accordance with law. The relevant
provisions of the Municipal Corporation of Greater Mumbai Act,
1888 are extracted below:
Provisions governing the disposal of municipal
property:
Section 92. With respect to the disposal of
property belonging to the corporation other than
property vesting in the corporation for the
purposes of the Brihan Mumbai Electric Supply
and Transport Undertaking, the following
provisions shall have effect, namely: —
(a) the Commissioner may, subject to the
regulations made in this behalf, dispose of, by
sale or otherwise, any movable property belonging
to the corporation not exceeding in value, in each
instance, five lakh rupees, of grant a lease of any
immovable property belonging to the corporation,
including any right of fishing or of gathering and
taking fruit and the like, for any period not
exceeding twelve months at a time :
Provided that every lease of immoveable property
granted by the Commissioner (other than a
contract for a monthly tenancy) the annual rent
where of at a rack rent exceeds 6 [fifty thousand
22
rupees] shall be reported by him, within fifteen
days after the same has been granted, to the
Improvements Committee;
(b) the Commissioner may, —
(i) with the sanction of the concerned Committee,
dispose off, by sale of otherwise any movable
property held by the Corporation, the value of
which exceeds rupees five lakhs ;
(ii) with the sanction of the 9[Standing Committee],
dispose off any moveable property held by the
Corporation, the value of which exceeds rupees
two crores ;
(iii) with the sanction of the concerned Committee,
grant a lease (other than a lease in perpetuity) of
any immovable property belonging to the
Corporation, including any such right as
aforesaid; or sell, or grant a lease in perpetuity of
any immovable property, the value of which does
not exceed 50,000 rupees or the annual rent of
which does not exceed 3,000 rupees ;
(c) with the sanction of the corporation, the
Commissioner may lease, sell or otherwise convey
any immovable property belonging to the
corporation
(cc) the consideration for which any immovable
property or any right belonging to the corporation
may be sold, leased or otherwise transferred shall
not be less than market value of such premium,
rent or other consideration;
23
(d) sanction of the corporation under clauses (b)
and (c) may be given either generally for any class
of cases or specially in any particular case ;
(dd) notwithstanding anything contained in this
section, the Commissioner may, with the sanction
of the Corporation, and with the approval of the
State Government, grant a lease of immovable
property belonging to the Corporation to a Co
operative Housing Society formed exclusively by
the officers and servants of the Corporation, or to
a public trust exclusively for medical and
educational purposes registered under the
Bombay Public Trust Act, 1950 or to a society
registered under the Societies Registration Act,
1860 or the Maharashtra Cooperative Societies
Act, 1960, a public trust registered under the
Bombay Public Trust Act, 1950, or a company
registered under the Companies Act, 1956 3[or
any person for the purposes of provision of public
latrines, urinals and similar conveniences or
construction of a plant for processing
excrementitious and other filthy matters of
garbages] or to a person who is dishoused as a
result of the implementation of any Development
Scheme of the Corporation or to a Cooperative
Housing Society formed exclusively by the
persons who are dishoused as a result of the
implementation of any Development Scheme of
the Corporation, at such rent, which may be less
than the market value of the premium, rent, or
other consideration, for the grant of such lease,
24
and subject to such conditions, as may be
provided by the byelaws made under section
461;
(ddd) notwithstanding anything contained in this
section, the Commissioner may, with the sanction
of the Corporation, and with the approval of the
State Government, grant a lease for a period not
exceeding 60 years, of municipal land which is
declared as a slum area under the provisions of
the Maharashtra Slum Areas (Improvement,
Clearance and Redevelopment) Act, 1971 to a co
operative society of slum dwellers occupying such
land, at such rent, which may be less than the
market value of the premium, rent, or other
consideration, for grant of such lease, and subject
to such conditions, as the Corporation may
impose. The approval of the State Government
under this clause may be given either generally
for any class of cases of such lands or specifically
in any particular case of such land : Provided
that, the Commissioner may in like manner
renew, from time to time ; the lease for such
period and subject to such conditions as the
Corporation may determine and impose ;
(dddd) All leases granted by the corporation of the
immovable properties belonging to the corporation
for whatever term shall be subject to the following
conditions in addition to the conditions stipulated
in the Leasedeed or Leaseagreement executed
by the corporation, namely: —
25
(i) Leasehold rights in respect of the properties
belonging to the corporation and given on lease
may be further assigned or transferred only with
the prior permission of the Commissioner, on
payment of such premium on account of unearned
income and transfer fees or charges at such rates
as may be specified by the corporation, from time
to time.
(ii) In the case of any contravention of the
provisions of subclause (i), the lessee or
transferor of such leasehold rights, shall be liable
to pay penalty in addition to such premium and
transfer fees or charges, at such rates as may be
specified by the corporation, from time to time.
(e) the aforesaid provisions of this section shall
apply, respectively, to every disposal of property
belonging to the Corporation made under or for
any purpose of this Act;
Provided that nothing in this section shall apply
Dr. Bhau Daji Lad Museum or to the site thereof
referred to in section 89C except with the previous
sanction of 5[the 6[State] Government].
Section 92A. Where—
(1) the Commissioner has transferred by way of
sale or exchange any immovable property
belonging to the Corporation and the terms of
such transfer direct that the property shall be
applied or enjoyed in a particular manner or the
use or enjoyment thereof shall be restricted in a
particular manner, or
26
(2) the owner of any immovable property has
entered into an agreement with the Corporation
concerning the application, enjoyment or use of
the property in a particular manner, such term,
condition or obligation shall be held to be
annexed to the property which is the subject
matter of the transfer or agreement and shall be
enforced against the transferee or owner and all
persons deriving title or interest under or through
him, notwithstanding—
(a) any law for the time being in force, and
(b) that the Corporation are not in possession of or
interested in any immovable property for the
benefit of which, the term, condition or obligation
was agreed to, entered into or imposed.”
30.At this stage, it would be relevant to notice certain conditions
in the contract. Clause 2(i) stipulates the minimum lease rent as
10.40 crores for which SHCL agreed to pay 0.1% over and above
₹
the minimum lease rent. Clause 5 of the agreement permitted
SevenHills to mortgage and/or create charge of the schedule
property. The conditions read as follows:
"5. The Owner hereby agrees to permit and allow
the SHCL on the terms and conditions to be
approved by the Owner which
permission/approval shall not be unreasonably
withheld, to mortgage and/or create charge on the
Schedule Property and/or SHCL's leasehold right
27
thereon with or without the Buildings on the
Schedule property during the lease period or prior
thereto i.e. during the project period) in any
manner whatsoever either in whole or in part as
SHCL may require from time to time to the
satisfaction of the lenders, for the purpose of
raising financial assistance from the Financial
Institutions/Banks/NBFOs/Cooperative
Societies/ Trust/ UF/ Partnership/Proprietary
Firm and any other lending
individuals/institutions, whether incorporated or
not, for any purpose for and in connection with the
said Project including for the purpose of
commencing, carrying out and completing the
construction of the Buildings, setting up of
hospital, Medical Educational institutions
commercial and other establishments within the
Frame work of Development Control Regulations
in force, in such Buildings, their running,
maintenance, renovation, reconstruction etc. For
this purpose, the SHCL shall have to apply for
permission not mortgage and/or create charge to
Municipal Commissioner two months in advance
and if the approval is not received within two
months from the date of receipt of such a request
by the Commissioner, it will be deemed as
approved and SHCL shall be at liberty to create
the mortgage of the Schedule Property in favour of
the Lenders without any recourse to the Owner."
28
31.Clause 15(a) which stated that the lease deed had to be
entered into upon on completion of the project and contained other
conditions, pertinently, reads as follows:
"15. LEASE OF PLOT:
a)Lease period:
i) The SHCL shall enter into a Lease Deed on
completion of project period for leasing the plot to
SHCL for the period of 60 years. After 60 years,
the lease period will be extended with the mutual
consent of Owner and SHCL on the terms that
may be mutually agreed upon by both the parties
for further period.
ii) The lease period of 60 years shall commence
from the date of completion of the Project period.
iii) On completion of the said Project the Owner
shall issue to SHCL 'Project Completion
Certificate'. Till the completion and commissioning
of the project and running of the Project facilities,
till the end of lease period, this Contract
Agreement is to be read, in conjunction with the
said Lease Deed which both Parties will enter into
on completion of the project period.
iv) The SHCL shall complete the construction of
the hospital building within the project period of
60 months excluding monsoon. the MCGM shall
be liable to issue the Project Completion
29
Certificate on written application by SHCL to that
effect after completion of the project.
xxxxxx xxxxxx xxxxxx
e)Penalty for delay:
i)SHCL shall complete the entire Project and
open the facility to public use within the approved
time limit. SHCL shall submit the work
programme with defined milestones. the
progress of the work shall be strictly as per the
programme of construction submitted by SHCL
and approved by the Commissioner.
In case SHCL fails to complete the Project as
aforesaid within the said Project Period of 60
(sixty) months excluding monsoon from issuance of
Commencement Certificate, and unless such
failure is due to force Majeure conditions, penalty
for delay shall be charged for the period of delay
which will be equivalent to 25% of Lease Rent
which SHCL would have paid to the Owner for
that period, had the Project been completed within
the Project Period and this shall be in addition to
lease rent.
ii)SHCL shall have to separately pay the
compensation for delay to the Owner at the end of
notice period.
iii)However, in case any delay occurs because
of circumstances beyond the control of SHCL only
30
suitable extension in the period of the Project
without imposing penalty or demand for
compensation for delay shall be granted for
completing the Project. No other claim or
compensation of whatsoever nature shall be
entertained.
xxxxxx xxxxxx xxxxxx
g)Lease Deed:
A Lease Deed shall be executed as per draft
annexed to this Contract Agreement as
Annexure'II' within one month from the expiry of
the Project period or on intimation from the owner
whichever is earlier.
17. MORTGAGE OF PLOT AND BUILDINGS
a) The SHCL is hereby allowed to sublease;
mortgage and create a charge on the said plot and
buildings either in part or in total to the satisfaction
of lenders for the purpose of raising financial
assistance to commence, progress, complete,
commission and run the hospital complex and other
commercial activities during the Pendency of the
lease period, from the financial institutions/
FIIS/Banks/Mutual Funds/Cooperative Societies,
Trusts/individuals/HUFs/Partnership Firms, other
lending institutions and lenders of any constitution
for the said Project with the prior permission of the
Commissioner, which permission shall not be
unreasonably withheld, during the Project period
31
and/or during the subsistence of the lease and the
Owner shall be kept informed of such deals after
permission by the Commissioner and SHCL shall
file relevant documentary evidence to that effect for
record of the owner.
The permission which shall be granted by the
Owner to SHCL to mortgage the Schedule Property
in favour of the lender (s) for raising finance will
remain irrevocable and irreversible during the
tenure of the Project period and lease period
except when the contact is terminated. In case
the contract is terminated for valid reason, the
Owner shall not bear any cost and consequences
of resultant termination of mortgage by SHCL to
any Financial Institution. While the right of
ownership will remain with the Owner, the
leasehold rights to the property will remain free
from encumbrances and dedicated to the lenders
during the currency of loan or the lease period
whichever is earlier and the lenders shall continue
to enjoy the same rights and privileges as that of
SHCL.
SHCL is also hereby allowed, with prior written
permission from Commissioner to sublet the
whole or part thereof and/or the buildings on the
Schedule Property. The SHCL shall be entitled to
sublet the Schedule Property and the Building/s
thereon from time to time in whole or in part for
any duration (not beyond the lease period) to any
other Party/ies (sublessee/s) on such terms and
32
conditions, as may be agreeable to SHCL within
the frame work of the tender and this Agreement
and for the same or similar purposes for which
agreement is intended, by means of duly
registered Deed/s. SHCL shall have to apply for
permission to Municipal Commissioner two
months in advance and if the approval is not
received within two months from the date of
receipt of such a request by the Commissioner, it
shall be deemed as approved."
32.A cumulative reading of the stipulations reveals that the
contract/agreement contemplates that the lease deed was to be
executed after the completion of the project. The contract reveals
that (a) the project period was for 60 months starting from the date
excluding the monsoon period; (b) by Clauses 5 and 17, SevenHills
could mortgage the property for securing advances from financial
institutions for the construction of the project and thereafter
towards its working. Such mortgage/charge or interest was subject
to approval by MCGM. In the event the contract was to be
terminated, it was agreed that MCGM would not in any manner be
liable towards the mortgaged amount and all its rights and
33
ownership would continue to vest in it free from encumbrances
(Clause 17).
33.The show cause notice in this case preceded admission of the
insolvency resolution process. In view of the clear conditions
stipulated in the contract, MCGM reserved all its rights and its
properties could not have therefore, in any manner, been affected
by the resolution plan. Equally in the opinion of this Court, the
adjudicating authority could not have approved the plan which
implicates the assets of MCGM especially when SevenHills had not
fulfilled its obligations under the contract.
34.The argument of the RP, the financial institutions (CoC), and
the SNMC with regard to MCGM's interest not being affected, in this
court's opinion is insubstantial. SNMC's proposed insolvency plan
on the one hand no doubt provided for the liquidation of MCGM’s
liabilities initially to the tune of 102 crores (later revised to over
₹
140 crores). However, the provisions of the resolution plan clearly
₹
contemplated infusion of capital to achieve its objectives. One of the
modes spelt out in the plan for securing capital was mortgaging the
34
land. Initially, no doubt, SNMC stepped into the shoes of
SevenHills and assumed its control. What is important to notice is
that the corporate restructuring was a way of taking over of the
company’s liquidation by SNMC as it was not only Seven Hills’
project with shares and liquidation of debts, but also the
restructuring of the company’s liabilities if necessary, by creating
fresh debts and mortgage of the land which directly affected MCGM.
35.Section 92 unequivocally prescribes the method whereby
MCGM’s properties can be dealt with through lease or by way of
creation of any other interest. The only mode permitted is through
prior permission of the corporation. It is a matter of record that in
the present case, the resolution plan was never approved by the
corporation and that it was put to vote. The contesting parties,
including the RP and CoC were unable to point out to anything on
the record to establish that a valid permission contemplated by
Section 92 was ever obtained with regard to the proposal in the
resolution plan. The proposal was approved by the NCLT and
MCGM’s appeal was rejected by NCLAT. The proposal could be
35
approved only to the extent it did not result in encumbering the
land belonging to MCGM.
36.It is evident from a plain reading of Section 92(c), that the
Commissioner (of MCGM) is empowered to, with the sanction of the
corporation, “lease, sell or otherwise convey any immovable property
belonging to the corporation.” It is not in dispute that the original
contract entered into on 20122005 contemplated the fulfilment of
some important conditions, including firstly, the completion of the
hospital project within a time frame; and secondly, timely payment
of annual lease rentals. It is a matter of record that the hospital
project was scheduled to be completed by 24
th
April, 2013. MCGM
cites Clause 15(g) of the contract to urge that within a month of this
event, i.e. completion of the hospital, a lease deed had to be
executed. This event never took place. Therefore, the terms of the
contract remained, in the opinion of the court, an agreement to
enter into a lease; it did not per se confer any right or interest,
except that in the event of MCGM’s failure or omission to register
the lease (in the event SevenHills had complied with its obligations
36
under the contract), it could be sued for specific performance of the
agreement, and compelled to execute a lease deed. That event did
not occur; SevenHills did not complete construction of the 1600 bed
hospital. Apparently, it did not even fulfill its commitment, or pay
annual lease rentals. In these circumstances, MCGM was
constrained to issue a show cause notice before the insolvency
resolution process began, and before the moratorium was declared
by NCLT on 13
th
March, 2018. According to MCGM, in terms of
Clause 26 (of the contract), even the agreement stood terminated
due to default by SevenHills. This court does not propose to
comment on that issue, as that is contentious and no finding has
been recorded by either the adjudicating authority or the NCLAT.
37.In Ram Singh Vijay Pal Singh & Ors. v. State of U.P. & Ors
(2007) 6 SCC 44, this court dealt with a similar provision, requiring
prior approval of the statutory authority without which the property
could not be disposed of. The court held that:
"The proviso to Subsection (1) of Section 12 of the
Act would show that the Mandi Samiti (Committee)
is not empowered to transfer any immovable
37
property without the previous approval in writing
of the State Agricultural Produce Markets Board
(Mandi Parishad). Section 26L of the Act deals
with the powers and functions of the Board. The
Director of Mandi Parishad (Board) has not been
conferred any power whereunder he may issue a
general direction that the shops, godowns and
sheds of the Mandi Parishad shall be transferred
or sold to the traders on hirepurchase basis.
Therefore, the appellants can derive no benefit
from the letter of the Director dated 4.11.1995,
wherein it was mentioned that a decision had
been taken to give the shops on hirepurchase
basis. In the counter affidavit the respondents
have specifically asserted that the Board never
took any such decision to sell the property of the
Mandi Samiti to the traders either on hire
purchase basis or otherwise. No document has
been filed to show that the Board ever took any
such decision. It is the case of the respondents
that the letter sent by the Director was his own
action which had never been authorized by the
Board. At any rate the proposal made by the
Director never fructified as no such decision was
taken by the Board and the Board never
authorized the Mandi Samities (Committees) of
various districts in the State to transfer the
property of the Samiti in favour of the traders of
agricultural produce who had been allotted the
shops, godowns and sheds by the Mandi
Parishad. In this view of the matter, the appellants
38
have no legal right to claim that the property be
given to them on hirepurchase basis."
38.In Essar Bulk Terminal Limited & Anr. v. State of Gujarat &
Ors. (2018) 3 SCC 750, again, this court held as follows:
"16. Despite this, what is clear from the record is
that the Appellants appear to have actually
dredged the channel to a depth of 14 meters and
appear to have reclaimed an area of 164 hectares
plus 170 hectares to the south of the mangroves,
without any permission at all. When this was
pointed out to Shri Mihir Joshi, the answer given
was that when permission is granted Under
Section 35(1) of the Gujarat Maritime Board Act, a
letter granting such permission specifically says
that it is permission that is granted Under Section
35(1) and for this purpose, a letter dated 2nd
August, 2008 was referred to. According to him,
therefore, the letter dated 14th June, 2007, which
referred only to an NOC for reclamation, could not
be given the status of permission Under Section
35(1). According to the learned Counsel, therefore,
if Section 35(1) were to be read with Section 35(2),
it would be clear that permission for reclamation
would only be necessary if a private asset were to
be created in the hands of a private person.
However, it is clear that the asset to be created
belonged only to the Government of Gujarat and it
was for the GMB to grant permission to the
39
Appellants to use the same. We are afraid that it is
difficult for us to accept this line of argument.
Section 35(1) is couched in negative language and
does not refer to private rights being created.
Section 35(2) cannot be read so as to throw light
on Section 35(1), as Under Section 35(2), the GMB
is only given a discretionary power to require a
person, who has acted in contravention of Section
35(1), to remove the illegal erection. The wide
language of Section 35(1) cannot be whittled down
by Section 35(2) in the manner argued by Shri
Joshi, as the GMB may or may not utilise the
discretionary power granted to it Under Section
35(2). The plain language of Section 35(1) cannot
be curtailed by reading by inference, into Sub
section (2), the fact that the GMB may, by notice,
require a person to remove an erection, only when
it has been made without previous permission, so
as to create a private asset in the hands of a
private person. The wide language of Section 35(1)
makes it clear that any reclamation within the
limits of the GMB cannot be carried out except with
the previous permission in writing of the GMB. It is
clear, therefore, that dredging to a depth of below
8 meters and reclamation of any area to the south
of the mangroves was done by the Appellants in
the teeth of Section 35(1) of the Gujarat Maritime
Board Act.
17. Mr. Sibal laid great stress on the letter dated
15th November, 2012 to show that, in point of fact,
what the Appellants were really angling for was to
40
conduct commercial operations beyond the captive
requirements of the Essar Steel plant at Hazira.
This letter, while asking for an addition of 3700
meters in addition to the existing 1100 meters
waterfront, also went on to speak of developing a
700 meters berth, along with the GMB, for
handling commercial cargo. Apart from this, Essar
planned to build a world class container terminal
and a dry dock, which would serve the shipping
industry generally. It also proposed to reclaim a
further 334 hectares land on the southern side
with the additional dredged material. A perusal of
this letter would leave no doubt about the fact that
despite Essar Steel's production being at much
less than what was projected, the Appellants'
continued demands would show that the real
motive was to go beyond a captive jetty and to
develop a commercial port which, as we have
seen, cannot be done without a global tender
under the Gujarat Infrastructure Development Act.
18. As stated hereinabove, as many as three
MOUs were executed between the Appellants, the
GMB and the State Government, which MOUs
were valid only for a period of 12 months and
were stated not to have granted any right to the
Appellants, who would incur all the expenditure
for the same. This being the case, it is a little
difficult to appreciate Shri Joshi's contention that
any legitimate expectation could be based on any
of the aforesaid expired MOUs. The High Court is
correct in its conclusion that no such expectation
41
could possibly have arisen out of the aforesaid
MOUs or the correspondence between the
Appellants and the GMB referred to.
19. It is also important to note from the
correspondence between the Appellants and the
GMB, that the Appellants were clearly told that the
land to be reclaimed by the Appellants would not
only belong to the Government of Gujarat, but also
that the GMB could utilize the aforesaid land for
any purpose. What seems to emerge on a reading
of the letters between the parties is that the
Appellants wished to dredge the canal, at their
own cost, which was next to their captive jetty, for
their own purposes, for which they obtained the
necessary permission. However, since dumping of
earth, which would emerge as a consequence of
dredging, into the open sea would be extremely
expensive, it was stated that instead this earth
could be dumped to create reclaimed land next to
the captive jetty, which would then benefit both
the Appellants and the GMB. In point of fact, 140
hectares out of 195 hectares that is reclaimed by
the Appellants is allocated to the Appellants for
their own purposes, the balance to be given as
and when a jetty of 1100 meters plus 3700 meters
of waterfront is constructed. The argument that
huge amounts had been spent to reclaim land is
wholly fallacioushuge amounts were spent to
dredge a canal which was permitted as the
Appellants alone were to bear the cost, and as an
42
increased draft would benefit all, as the canal
was open to all to use. Therefore, any plea as to a
legitimate expectation of reclaimed land being
allocated for the Appellants' own use, thanks to
large amounts being spent, is contrary to the
correspondence by the Appellants themselves."
An identical approach was adopted in Saroj Screens Pvt. Ltd. v
Ghanshyam & Ors., (2012) 11 SCC 434.
39.The principle that if a statute requires a thing to be done in a
particular manner, it should be done in that manner or not at all,
articulated in Nazir Ahmad v. Emperor, AIR 1936 PC 253, has found
widespread acceptance. In the context of this case, it means that if
alienation or creation of any interest in respect of MCGM’s
properties is contemplated in the statute through a particular
manner, that end can be achieved only through the prescribed
mode, or not at all.
40.This Court also notices that an initial No Objection Certificate
was issued by MCGM voluntarily, for creation of interest in respect
of its properties. Upon its refusal to grant approval, SevenHills filed
proceedings under Article 226 before the Bombay High court (W.P.
43
No 1728 of 2011), in which the Court directed to grant issuance of
certificate. At the same time, the High Court observed as follows:
"11. ...... It is, however, required to be noted here
that the Corporation is nor borrowing any amount
for its purpose....If the petitioners want financial
assistance from the Bank, naturally, it cannot
mortgage only the superstructure but the entire
property is required to be mortgaged. Aprart from
that even if there is a defect in the title in the
matter of creating mortgage, the Corporation is not
going to suffer in any manner and it is for the
concerned Bank to consider the same while giving
financial assistance. The Corporation is not going
to get any financial assistance from the Bank and,
therefore, whatever documents which the
petitioners may execute in favour of the Bank, the
Corporation is not bound by the same....The said
NOC can be granted by the Corporation without
prejudice to its rights and contentions that the
land in question belongs to them and, therefore, no
mortgage could have been created for the same. It
is always open to the Corporation to ascertains
right to the extent that they are not bound by
execution of such documents with the
Bank....However, such grant of NOC, would be
without prejudice to the rights and contentions of
the Corporation. The Corporation may also
mention such aspect while giving NOC to the
petitioners that such NOC is given without
prejudice to the rights and contentions that their
44
land could not have been mortgaged by the
petitioners with the Bank. (emphasis supplied)
12. ......Apart from the same, by granting NOC it
cannot be construed that the Corporation has also
mortgaged its property in favour of Axis Bank in
any manner....
15. ....It is clarified that this order is passed
without prejudice to the rights and contentions of
both the sides and it will have no effect so far as
deciding the matter on merit is concerned.....”
*************** *************
41.The material placed on record by MCGM before this Court also
reveals that the meeting held by the Corporation on 14
th
December,
2018, referred back to the resolution proposal given by SNMC. The
minutes of the meeting records that three members were
unanimous in their view that since SevenHills had not complied
with the terms and had even sought to encumber the property by
mortgage, SNMC, a UAE based company, ought not be granted
approval to take over the plot and proceed with its project.
42.Now, this court proposes to deal with the contention that the
provisions of the Code override all other laws and hence, that the
45
resolution plan approved by the NCLT acquires primacy over all
other legal provisions. Facially, this argument appears merited.
Section 238 enacts that:
“238. Provisions of this Code to override other
laws. — The provisions of this Code shall have
effect, notwithstanding anything inconsistent
therewith contained in any other law for the time
being in force or any instrument having effect by
virtue of any such law.”
43.The scope of this provision has been the subject matter of
debate in several judgments of this court. In Jaipur Metals &
Electricals Employees Organization v. Jaipur Metals & Electricals Ltd.
(2019) 4 SCC 227, the correctness of a High Court’s view which
refused to transfer winding up proceedings pending before it and set
aside the NCLT’s order admitting an insolvency resolution
application at the behest of a financial creditor, was in issue. This
court held as follows, setting aside the judgment impugned in that
case:
“It is clear that Respondent No. 3 has filed a
Section 7 application under the Code on
11.01.2018, on which an order has been passed
46
admitting such application by the NCLT on
13.04.2018. This proceeding is an independent
proceeding which has nothing to do with the
transfer of pending winding up proceedings before
the High Court. It was open for Respondent No. 3
at any time before a winding up order is passed to
apply under Section 7 of the Code. This is clear
from a reading of Section 7 together with Section
238 of the Code which reads as follows:
“238. Provisions of this Code to override
other laws. — The provisions of this Code
shall have effect, notwithstanding
anything inconsistent therewith contained
in any other law for the time being in force
or any instrument having effect by virtue
of any such law.”
18. Shri Dave’s ingenious argument that since
Section 434 of the Companies Act, 2013 is
amended by the Eleventh Schedule of the Code,
the amended Section 434 must be read as being
part of the Code and not the Companies Act 2013,
must be rejected for the reason that though Section
434 of the Companies Act, 2013 is substituted by
the Eleventh Schedule of the Code, yet Section
434, as substituted, appears only in the
Companies Act, 2013 and is part and parcel of that
Act. This being so, if there is any inconsistency
between Section 434 as substituted and the
provisions of the Code, the latter must prevail. We
are of the view that the NCLT was absolutely
47
correct in applying Section 238 of the Code to an
independent proceeding instituted by a secured
financial creditor, namely, the Alchemist Asset
Reconstruction Company Ltd. This being the case,
it is difficult to comprehend how the High Court
could have held that the proceedings before the
NCLT were without jurisdiction. On this score,
therefore, the High Court judgment has to be set
aside.”
44. In the recent judgment in Duncans Industries v. A.J. Agrochem
2019 SCC Online (SC) 1319, the issue was that action under
Section 16D(4) of the Tea Act, which provides that the Central
Government could take such steps as may be necessary for the
purpose of efficiently managing the business of the undertaking,
had been taken. It was urged that any notification under Section
16D has effect for five years, which could only be extended if the
Central Government was of the opinion that it is expedient to do so
in public interest, for such period not exceeding one year at a time,
and for total period not exceeding six years. It was submitted that
Section 16E refers to the power of the Central Government to
restart the tea undertaking if it is found necessary in the interest of
48
the general public. The argument was that an insolvency process is
also meant to culminate in liquidation, if there is no revival, and
that since the Tea Act permits the Central Government to take over
the management of a tea estate which is not run properly, prior
permission under Section 16G is applicable to such an estate, the
management of which has been taken over by the Government. This
contention was negatived, by this court, which relied on Section
238 of the Code.
45.In Macquaire Bank Ltd. v. Shilipi Cable Techologies Ltd. (2018)
2 SCC 674, one of the issues was the interplay between Section 9 of
the Code and provisions of the Advocates Act. It was argued that a
demand notice issued through an advocate was not permissible and
that the provisions of the Code overrode all other laws. This court
negative the contention, holding that it is only in the case of
inconsistency, that by reason of Section 238 of the Code would its
provisions prevail. On a harmonious construction of the seemingly
inconsistent provisions, if the court could give effect to both, it
would do so.
49
46.Dharani Sugars & Chemicals Ltd. v. Union of India & Ors.
(2019) 5 SCC 480 is a relevant recent decision of this court. The
question which arose in that case was the legality and
constitutionality of directions issued by the Reserve Bank of India,
through a circular of 12
th
February, 2018 regulating resolution of
stressed assets of debtors. This court elaborately dealt with
provisions of the Banking Regulation Act, 1949 and the Reserve
Bank of India Act, 1934 and held that the power to issue directions
regarding initiation of insolvency proceedings vested in the RBI,
subject to the approval of the Central Government. The court
significantly held that the power was contained “within the four
corners” of Section 35AA and observed as follows:
“A conspectus of all these provisions shows that
the Banking Regulation Act specifies that the
Central Government is either to exercise powers
along with the RBI or by itself. The role assigned,
therefore, by Section 35AA, when it comes to
initiating the insolvency resolution process under
the Insolvency Code, is thus, important. Without
authorisation of the Central Government,
obviously, no such directions can be issued.
50
30. The corollary of this is that prior to the
enactment of Section 35AA, it may have been
possible to say that when it comes to the RBI
issuing directions to a banking company to initiate
insolvency resolution process under the Insolvency
Code, it could have issued such directions Under
Sections 21 and 35A. But after Section 35AA, it
may do so only within the four corners of Section
35AA.
31. The matter can be looked at from a slightly
different angle. If a statute confers power to do a
particular act and has laid down the method in
which that power has to be exercised, it
necessarily prohibits the doing of the act in any
manner other than that which has been
prescribed. This is the wellknown Rule in Taylor
v. Taylor, [1875] 1 Ch. D. 426, which has been
repeatedly followed by this Court. Thus, in State of
U.P. v. Singhara Singh, (1964) 4 SCR 485, this
Court held:
‘The Rule adopted in Taylor v. Taylor
[(1875) 1 Ch D 426, 431] is well recognised
and is founded on sound principle. Its result
is that if a statute has conferred a power to
do an act and has laid down the method in
which that power has to be exercised, it
necessarily prohibits the doing of the act in
any other manner than that which has been
prescribed. The principle behind the Rule is
that if this were not so, the statutory
provision might as well not have been
51
enacted. A Magistrate, therefore, cannot in
the course of investigation record a
confession except in the manner laid down
in Section 164. The power to record the
confession had obviously been given so that
the confession might be proved by the
record of it made in the manner laid down.
If proof of the confession by other means
was permissible, the whole provision of
Section 164 including the safeguards
contained in it for the protection of Accused
persons would be rendered nugatory. The
section, therefore, by conferring on
Magistrates the power to record statements
or confessions, by necessary implication,
prohibited a Magistrate from giving oral
evidence of the statements or confessions
made to him. (at pp. 490491)
Following this principle, therefore, it is clear that
the RBI can only direct banking institutions to
move under the Insolvency Code if two conditions
precedent are specified, namely, (i) that there is a
Central Government authorisation to do so; and (ii)
that it should be in respect of specific defaults. The
Section, therefore, by necessary implication,
prohibits this power from being exercised in any
manner other than the manner set out in Section
35AA.”
52
47.In the opinion of this court, Section 238 cannot be read as
overriding the MCGM’s right – indeed its public duty to control
and regulate how its properties are to be dealt with. That exists in
Sections 92 and 92A of the MMC Act. This court is of opinion that
Section 238 could be of importance when the properties and assets
are of a debtor and not when a third party like the MCGM is
involved. Therefore, in the absence of approval in terms of Section
92 and 92A of the MMC Act, the adjudicating authority could not
have overridden MCGM’s objections and enabled the creation of a
fresh interest in respect of its properties and lands. No doubt, the
resolution plans talk of seeking MCGM’s approval; they also
acknowledge the liabilities of the corporate debtor; equally, however,
there are proposals which envision the creation of charge or
securities in respect of MCGM’s properties. Nevertheless, the
authorities under the Code could not have precluded the control
that MCGM undoubtedly has, under law, to deal with its properties
and the land in question which undeniably are public properties.
The resolution plan therefore, would be a serious impediment to
53
MCGM’s independent plans to ensure that public health amenities
are developed in the manner it chooses, and for which fresh
approval under the MMC Act may be forthcoming for a separate
scheme formulated by that corporation (MCGM).
48.The last contention of the respondents, that MCGM was bound
by the statement made by its counsel, in the opinion of this court,
cannot prevail. As held earlier, there is no approval for the plan, in
accordance with law; in such circumstances, the written plea
accepting the plan, by a counsel or other representative who is not
demonstrated to possess the power to bind MCGM, is inconclusive.
In this regard, the court notices the wellknown principle that there
can be no estoppel against the express provisions of law. (Ref.
Kasinka Trading v. Union of India (1995) 1 SCC 274, Darshan Oils
(P) Ltd. v. Union of India (1995) 1 SCC 345, Shrijee Sales Corporation
v. Union of India (1997) 3 SCC 398, Shree Sidhbali Steels Ltd. v.
State of U.P. (2011) 3 SCC 193, Pappu Sweets and Biscuits v.
54
Commr. of Trade Tax, U.P. (1998) 7 SCC 228 and Commr. of
Customs v. Dilip Kumar & Co. (2018) 9 SCC 1.)
49.In view of the foregoing reasons, this court holds that the
impugned order and the order of the NCLT cannot stand; they are
hereby set aside. The appeal is accordingly allowed, without orders
on costs.
........................................J.
[ARUN MISHRA]
........................................J.
[VINEET SARAN]
........................................J.
[S. RAVINDRA BHAT]
New Delhi,
November 15 , 2019.
Legal Notes
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